The pension sweeteners are just a tiny portion of the state’s current problems. As noted here many, many times, including earlier today, the real problem has been the deliberate funding neglect.
For the Tribune to now argue for funding flexibility is just insane, and shows how little that editorial board actually knows about how we got here.
“Pardon me,” said Ty Fahner to a nearby microphone that he accidentally bumped into during his testimony last week before the Illinois Senate Executive Committee.
Fahner could probably be excused for apologizing to an inanimate object. The president of the Civic Committee of the Commercial Club of Chicago and self-styled pension expert had been forced to wait for hours in the hearing room before testifying against Senate President John Cullerton’s pension reform bill.
Cullerton (D-Chicago) was obviously furious with Fahner for helping organize the opposition to his bill, and he grilled the former Illinois attorney general mercilessly — tag-teaming with Senate President Pro Tem Don Harmon (D-Oak Park), who picked apart the hostile witness piece by piece.
Fahner tried to remain calm during his appearance, but apologizing to the mic showed how much he was rattled.
A day earlier, word went around that business leaders had been calling and emailing Republicans to pressure them to vote against Cullerton’s proposal. Even an apparent Republican gubernatorial candidate, venture capitalist Bruce Rauner, got into the act.
As a result, Cullerton’s top priority for the legislative session, the passage of Senate Bill 1, was derailed when Republicans began jumping ship.
Cullerton’s bill combines the Nekritz/Cross pension reform plan with his own. The Nekritz/Cross measure, introduced by state Rep. Elaine Nekritz (D-Northbrook) and House Minority Leader Tom Cross (R-Oswego), allows annual cost-of-living adjustments for retirees only on the first $25,000 of pension income, caps the salary on which a pension can be based and provides for a funding guarantee by allowing the state’s five pension systems to sue the state for not making payments to their funds.
The other half of Cullerton’s bill includes his reform language, which Cullerton insists is the only constitutional way forward. That language would take effect only if the Nekritz/Cross provisions are struck down as unconstitutional.
Cullerton’s bill relies on a legal concept known as “consideration.” Essentially, it means that people have to be offered a choice before the state can get out of its constitutionally mandated contractual responsibilities.
Cullerton would force retirees to choose between receiving annual cost-of-living raises or having the state pay for their medical insurance.
The business types, including Fahner and Rauner, believe Cullerton’s bill does not save the state nearly enough money in pension costs over the long term. The Nekritz/Cross bill is expected to save several times more.
The business leaders also say that guaranteeing that retirees get government-paid health insurance in exchange for giving up their cost-of-living raises would declare that health insurance is a contractual pension obligation protected by the Illinois Constitution. And that, they say, would lead to much higher costs down the road.
“Bruce opposes SB 1 because while it fixes one small piece of the pension crisis, it takes away key future negotiating leverage by contractually guaranteeing future government contributions,” said a spokesperson for Rauner. “The bill, however well-intentioned, gives away too much while not getting enough in return.”
Rauner has become somewhat infamous in Springfield the last several months for his regular email harangues against Cross, Senate Minority Leader Christine Radogno (R-Lemont) and other Republicans. His vast fortune and potential run for governor next year have forced those leaders to pay attention.
There is more behind this opposition, however. Many in the business community believe that by putting both pension reform concepts into a single bill, the General Assembly would enable judges to declare the Nekritz/Cross plan as unconstitutional.
Even the most generous explanation of the Nekritz/Cross plan doesn’t come close to explaining how it complies with the state Constitution’s declaration that pension benefits are an “enforceable contractual relationship” and that benefits “shall not be diminished or impaired.”
The reasoning of the business groups is that giving judges a choice between a plan that makes almost no pretensions of being constitutional and one that at least tries to pass muster (Cullerton’s) would lead to Nekritz/Cross being struck down.
So, now what?
Fahner is the same guy who said in November that the pension crisis “has grown so severe that it is now unfixable.” He later backed away from that remark, explaining that he meant the issue had become politically unfixable.
But he and Rauner and their cohorts have now helped kill off what had been a politically viable plan, at least in the Senate.
- AFSCME Steward - Monday, Mar 18, 13 @ 9:57 am:
Just what is a severe emergency ? We may lose the next election or control of the GA unless we make big pronises to entice votes ? We can always join with the Civic Federation and blame the employees again.
I can’t believe that the Tribune, which has been an anti state employee pension hawk, would advocate the same irresponsible behavior as what got us to this mess in the first place.
“severe emergencies between now and 2045 may force the state to devote extra resources to priorities other than pensions”
- titan - Monday, Mar 18, 13 @ 10:01 am:
“The reasoning of the business groups is that giving judges a choice between a plan that makes almost no pretensions of being constitutional and one that at least tries to pass muster (Cullerton’s) would lead to Nekritz/Cross being struck down.”
That is poppycock. A badly flawed Act will be struck down whether or not there is a better plan contingently provided for.
- wordslinger - Monday, Mar 18, 13 @ 10:03 am:
I greatly admire the Tribbies’ abilities to deal with their cognitive dissonance.
Some would feel dread, discomfort or anxiety sharing it with the world. Not them. Good meds, I guess.
- Demoralized - Monday, Mar 18, 13 @ 10:03 am:
The fat cat millionaires at the Civic Committee won’t be happy until they completely decimate employee pensions. The greedy millionaires did it in the private sector and now they are targeting the public sector. I don’t see them giving up their ridiculous salaries or their golden parachutes. The rich just keeping going after the middle class and won’t stop until they’ve stomped them into oblivion and take all of the wealth for themselves. Their greed is ugly.
- rusty618 - Monday, Mar 18, 13 @ 10:04 am:
Just what we need, and “out” for the legislator to skip pension payments in the future. Who will be the sacrificial lambs next time the pension fund is shortchanged?
Salary caps for pension determinations is a good start to prevent sweeteners. Wasn’t there a downstate legislator that Blago appointed as director of DNR who only served 20 days in that position to gain an extra $40K/year toward his pension? That kind of abuse has to be stopped!
- Bill White - Monday, Mar 18, 13 @ 10:09 am:
@wordslinger
You are being too charitable. Practitioners of shock doctrine economics don’t grok cognitive dissonance.
- mythoughtis - Monday, Mar 18, 13 @ 10:10 am:
Ah, so first we will try to decimate the existing employees’ and retirees’ pensions, and then we will do it again closer to 2045? Because that is what will happen if the pension payments are allowed to be skipped again.
Another example of history repeats itself.
The only other comment I can make is that anyone who believes this cannot have a straight face when saying that the pensions must be reduced. Either there is not enough money for current pensions and we must be careful to ensure we fully fund the pension fund… OR we can raid the pension fund and leave current pensions alone. You can’t say we don’t have money for current pensions, and also say we can raid the pension fund in he future in an emergency.
- haverford - Monday, Mar 18, 13 @ 10:14 am:
Trib Ed Board on other topics they’ve frequently covered:
“We’re just saying that Blagojevich made some good decisions, and Mike Madigan is an a-ok guy!”
- MJZ - Monday, Mar 18, 13 @ 10:22 am:
What I found ironic is the funding guarantee is the most prima facie constitutional thing about HB3411 and SB34. It’s why IMRF is so healthy. It gives labor leverage to go into court and compel a payment. It’s good public policy. But because it ensures pension certainty, it has to come out. Don’t get it.
- Formerly Known As... - Monday, Mar 18, 13 @ 10:27 am:
Well then, sounds like it’s a good thing Cullerton has his veto proof majority in the Senate.
He simply needs to get his own caucus in order and he’ll be fine.
LOL.
- foster brooks - Monday, Mar 18, 13 @ 10:34 am:
Yep no doubt the trib editorial board is loaded with rRepublicans. Doubletalk doubletalk
- Norseman - Monday, Mar 18, 13 @ 10:39 am:
Too bad the Tribbies don’t read this blog. They would have picked up on the fact that the guarantee is meaningless. They then could have avoided showing off their hypocrisy to the world.
If this didn’t involve the lives of so many, this would be laughable.
- Ruby - Monday, Mar 18, 13 @ 10:41 am:
The Tribune is no longer even pretending that they want to see the state’s economic problems solved or stabilize the pension system.
- Downstater - Monday, Mar 18, 13 @ 10:43 am:
There is absolutely no will to fix the pension mess or spending mess. Hello, junk bond status for Illinois.
- Bill - Monday, Mar 18, 13 @ 10:55 am:
The trib has let their cat out of the bag. If the state makes their payments the crisis goes away. If they don’t it remains and festers. The long term problem has already been solved by the “reforms” for tier 2 employees. The debt will have to be paid sometime, somehow no matter how bad they hurt pensioners and actives. Change a few variables in a few formulas and the so called liability dissipates over time.
- Nieva - Monday, Mar 18, 13 @ 10:57 am:
I remember when the counties had to start catching up the IMRF system for their employees and County office holders. They raised property taxes by quite a lot and now it is the best funded system in Illinois. They have to pay every year or the system will have them in court. Maybe we need a bill that will force Illinois to pay what they owe.
- langhorne - Monday, Mar 18, 13 @ 10:59 am:
the pension “reform” bills inflict varying degrees of pain on retirees, and current and future employees. the only thing we were supposed to be given in return is that, in the future, the GA promises to really, really, pinky-swear, cross-my-heart, make the required payments. and if they dont, we can ask the judges to spank them. i have been having a hard time believing a new promise, even with the right to sue, is worthwhile when we have decades of broken promises to go by. enact the guarantee, then change it when it suits them. yet now the trib doesnt even want to sweet talk employees before giving them the shaft. amazing. the arguments have come full circle and it is clear the trib and business leaders just want to screw over state employees.
- east central - Monday, Mar 18, 13 @ 11:08 am:
Passing unconstitutional legislation may hurt the ability of the State to issue bonds as the rating agencies will have to apply an overriding footnote relating to the likelihood that the legislation will be struck down. It creates a lengthy period of uncertainty with a probable outcome of having to start over at the end of the legal process. This is bad for business in Illinois.
The threat to apply police powers would tell businesses and other creditors that the State is willing to try to use police powers to effectively self-declare bankruptcy with itself as the trustee whenever the State wishes to avoid politically difficult solutions to budgetary problems. This is bad for business in Illinois.
Further, the legal arguments associated with any attempt to use police powers would put the State in the position that actions that bring in new revenue (gambling expansion, for example), extend the temporary income tax increase or reallocate resources within the budget refute the claim that the State cannot make adjustments to cover the annual pension payments. The need to maintain the illusion of an unsolvable dire emergency throughout the court process could freeze capital programs and could create a financial cliff in 2015 when the temporary tax expires. The result would be more uncertainty and new budgetary crises that would be bad for business in Illinois.
A constitutional solution is the only solution that is good for business.
- AFSCME Steward - Monday, Mar 18, 13 @ 11:15 am:
However, the choice must allow a gain for the chooser. This current unconstitutional plan is the same as saying if you let me cut off your right arm I’ll let you keep your left leg. Allowing me to choose between 2 negatives is not consideration.
“Cullerton’s bill relies on a legal concept known as “consideration.” Essentially, it means that people have to be offered a choice before the state can get out of its constitutionally mandated contractual responsibilities.”
- Meaningless - Monday, Mar 18, 13 @ 11:15 am:
Could someone help me out and tell me where I can re-finance my home mortgage and not make the monthly payments when I don’t feel like it?
- Nieva - Monday, Mar 18, 13 @ 11:19 am:
That would be any bank Meaningless. The state just added money to the program they have to help underwater and delenquent borrowers up to 35k now. It was just 25k but Pat decided to increase it by almost half.
- Captain Illini - Monday, Mar 18, 13 @ 11:20 am:
Demoralized - It is my sincere hope that you or anyone on this blog becomes a millionaire, or does incredibly well financially. Whether you’re greedy or not is up to you after you’ve reached financial nirvana. What should however be consistent is contract law and the constitution regardless if you’re a “fat cat” or “union”…1% 10% 73.5% or whatever. It’s those darn facts again getting in the way of the truth…the GA and the State of Illinois caused this mess, the piper needs his pay.
- Obamas Puppy - Monday, Mar 18, 13 @ 11:24 am:
Their ultimate goal is to bankrupt these systems then settle for pennies on the dollar so that Grandma and Grandpa get sold down the road just like they have done to countless private sector workers. Cant wait to see the Trib endorse Rauner, can you say blow out?
- Wensicia - Monday, Mar 18, 13 @ 11:28 am:
The Tribune editorial page should be transferred to the comics section.
This is their way of saying the state should abandon the pension systems. They believe local communities should be responsible.
- Chavez-respecting Obamist - Monday, Mar 18, 13 @ 11:30 am:
Why does the Tribune hate Illinois?
- Been There - Monday, Mar 18, 13 @ 11:36 am:
===The state must keep the flexibility to make those choices — not tie its own hands.====
Their hands should be tied.
I think the choice the legislators should have is to either spend less elsewhere or raise taxes. But make the payments.
- illilnifan - Monday, Mar 18, 13 @ 11:38 am:
Are the folks at the Tribune upset that they had to make changes when they went through bankruptcy, so they want to take this out on everyone else?
- AC - Monday, Mar 18, 13 @ 11:43 am:
Cutting (reforming) pensions is unconstutional, revenues are off the table thanks to legislative leaders, and the Tribune editorial staff have lost their minds. I’ve lost hope that this problem can be solved.
- Meaningless - Monday, Mar 18, 13 @ 11:43 am:
Would Ralph Martire’s reasonable plan tie the politicians’ hands too much? or … as Elaine Nekritz claims, Martire’s plan is not based on sound actuarial science!?
- Anon. - Monday, Mar 18, 13 @ 11:44 am:
Not that I want to diffent the Trib, but the biggest reason for not “refinancing” the pension obligation by issuing bonds (which cost a lot lower interest rate than the earnings rate assumed in valuing the pension obligations, resulting in debt service payments substantially lower than the current ramp) is that the state would have to pay the debt service on the bonds when due. The State owes the same amount either way, but they’ve chosen to keep the debt on their credit card rather than refinancing because they want to skip a payment every now and then.
- Arthur Andersen - Monday, Mar 18, 13 @ 12:07 pm:
-The Tribune editorial page should be transferred to the comics section-
Right on Wen!
- mid-level - Monday, Mar 18, 13 @ 12:14 pm:
Here is why I believe there is such a big deal about pensions NOW. It’s because after the 2014 budget, the ramp significantly levels off and there won’t be as much of a public outrage.
Look at the Gov’s office own forcasts…
http://www.state.il.us/budget/Financial%20Reports/3%20Year%202013%20FINAL.pdf
FY2013 to FY2014 the contribution increase is over 930 million. Debt services rises an additional 100 million.
FY2014 to FY 2015 the increase is down to 164 million. And that increase is almost covered by a decrease in debt service by 154 million. So the net next year is only a 10 million dollar increase.
There will be no public outrage for a 10 million increase.
- Mouthy - Monday, Mar 18, 13 @ 12:36 pm:
Huh, the Trib is still in business?
- springfieldwatcher - Monday, Mar 18, 13 @ 1:02 pm:
RE: Ty Fahner “There is no moral exemption for any man or body of men that breaks contracts. Nor is there any hope of public or private respect for a contract breaker. A contract breaker is an uttermisfit as a citizen or a business man.”
Franklin MacVeagh, former President of the Commericial Club of Chicago and U.S.Secretary of Treasury
- Fed up - Monday, Mar 18, 13 @ 1:05 pm:
I wonder if Cullertons offering retirees a choice will be constitutional when it is argued the choice is being made under duress. Either way the retiree is being harmed and benefits diminished.
- unbiased observer - Monday, Mar 18, 13 @ 1:14 pm:
the blog comments on this website dont represent the views of the majority of the state. this is just a highly vocal group of anti-pension reformers in general who blog on this site.
there are no further options to solve this mess we are in. we are going to have to raise revenue AND decrease pension benefits. there is no other way around it. other things can be done in the spirit of efficiency as have been mentioned previously by many posters, but only 2 things will really make a difference here:
1)increased revenue
2)decreased pension benefits.
it will take both items to get the job done. it is just a matter of time. if a deal involving both of those items doesn’t get done relatively soon, Illinois will become insolvent.
it would be great if a deal could be done which would satisfy the anti pension reform group, but this is impossible. nothing which actually works will be supported by them because it will decrease their benefits.
accordingly, legislators need to go ahead and pass legislation which solves this problem.
- the Patriot - Monday, Mar 18, 13 @ 1:17 pm:
The key language==extra resources to priorities==
IL will spend billions this year and our legislature without input from the Governor gets to choose how. They will either chose a responsible solution to cutting entltements and fund pensions or CHOOSE to kick the can and protect themselves.
I am tired of elected officials couching this arguement as one of epic proportions. It is this bad, because they have FAILED. You can’t violate people’s rights because it was the only one that would let you keep your cushy job. It is very simple.
Do a 20% cut accross the board, fund our obligations, get fired. Maybe the next guy will screw up enough for you to get another shot down the road.
- Mix_It_Up - Monday, Mar 18, 13 @ 1:30 pm:
A state cannot become insolvent or declare bankruptcy because it has the power to increase taxes and reduce spending. This whole fiasco has to do with keeping the “temporary” tax increase. I have not known of any tax to be temporary. In fact, they may try to increase taxes because of the so called pension crisis.
- Rich Miller - Monday, Mar 18, 13 @ 1:32 pm:
===I have not known of any tax to be temporary.===
Well, then you haven’t been paying attention. At least one of Big Jim Thompson’s income tax hikes was allowed to expire.
- Rich Miller - Monday, Mar 18, 13 @ 1:33 pm:
Also, much more recently, Cook County’s sales tax increase, while not temporary, was phased out.
- unbiased observer - Monday, Mar 18, 13 @ 1:35 pm:
it can become insolvent if it is politically impossible to pass enough increased taxes to meet its needs. remember there is no appetite for tax increases, especially to the level it would take to meet our coming needs. i can assure there are many more people against radical tax increases than there are against pension reform. politically, the numbers are not in the favor of the anti-pension reform group as they represent a small (but vocal) percentage of the population when compared to the tax paying population at large.
anti pension reform complaining now will seem like a sunday school picnic to the legislators when compared to the statewide howling which will ensue if taxes start getting cranked to level needed to get out of this mess, while stateworkers continue to enjoy untaxed undiminished pensions.
- Mix_It_Up - Monday, Mar 18, 13 @ 1:38 pm:
I don’t recall these temporary taxes because they may not have affected me. But, I am sure they were replaced with a backdoor tax such as an increase in fees which the state has done.
- Rich Miller - Monday, Mar 18, 13 @ 1:39 pm:
===the numbers are not in the favor of the anti-pension reform group as they represent a small (but vocal) percentage of the population when compared to the tax paying population at large. ===
For an “unbiased observer,” you are woefully uninformed, which would be a prerequisite for being so allegedly unbiased.
From a recent statewide poll http://paulsimoninstitute.org/images/PDF/spring2013/pension.pdf
• A majority opposes suspending retirees’ annual cost of living increases for six years. There were 57.0 percent opposed and 36.5 percent in support.
• Voters were evenly divided over the idea of granting a cost of living increase to only the first $25,000 of retirees’ pensions. There were 45.17 percent favoring it and 44.3 percent opposed.
• Another way to handle cost of living increases is to have them deferred until the retirees are age 67 or older. This proposal gained support from 58.3 percent and was opposed by 37.5 percent.
• A more controversial proposal is to increase the age at which retirees can receive full benefits from 65 to 67. This proposal, too, gained majority support with 56.8 percent in favor and 41.3 percent opposed.
• Respondents were also asked about proposals to increase the age at which retirees could receive state-paid health care benefits from 65 to 67. This proposal divided the electorate almost in half, with 49.0 percent favoring and 48.7 percent opposed.
- Rich Miller - Monday, Mar 18, 13 @ 1:40 pm:
By the way, “Unbiased Observer,” those results took all of 10 seconds to find online. So, either up your game or change your handle. Thanks.
- Norseman - Monday, Mar 18, 13 @ 2:00 pm:
Rich said it all too well in response to your post, “unbiased.” Now stop being disingenuous and change your nickname. You have a right to believe what you like, but don’t try and insult our intelligence by claiming to be unbiased.
- unbiased observer - Monday, Mar 18, 13 @ 2:08 pm:
rich,
looks to me like you are making my argument for me. the numbers you provide, which i had already read, dont really overwhelmingly support the anti-reform group. in fact quite the opposite.
the results of the survey you mentioned above are much more balanced than the results of the postings presented on your website.
the general public of illinois is just now starting to wake up to the dire financial situation facing illinois and as the crunch starts to get more palpable (increased taxes threatened, decreased services, more money cut to schools, even more vendors not being paid) the numbers you site above will go even further against the anti pension reform people.
i am an analyst not a lobbyist or partisan. i look at the situation and predict what is goign to happen. i propose changes based upon possiblities that can actually work, rather than focus upon whose fault it is that we are in this position to begin with.
it is very unfortunate to the pensioners that we are in this mess. but it will not be possible for them to not take any decrease in their benefits, if your goal is actually turn this state around. that has to be part of the solution. this is just analysis.
- iThink - Monday, Mar 18, 13 @ 2:16 pm:
==more people against radical tax increases than there are against pension reform==
Public opinion is not everything, there is a reason there is a constitution.
- Josh - Monday, Mar 18, 13 @ 2:22 pm:
Unbiased Observer has just hit upon an ingenious plan for solving the pension funding problem! The state should cut funding for the SHIFT key on all state computers. The resulting savings will bring the pension funds into balance in no time!
- Rich Miller - Monday, Mar 18, 13 @ 2:36 pm:
===looks to me like you are making my argument for me.===
Um, no. Your argument…
===the numbers are not in the favor of the anti-pension reform group as they represent a small (but vocal) percentage of the population when compared to the tax paying population at large. ===
Your argument had nothing to do with the reality on the ground.
- Captain Illini - Monday, Mar 18, 13 @ 2:43 pm:
Unbiased said, “i propose changes based upon possiblities that can actually work”
Okay pal, then weave into your analysis things like, oh, I don’t know…contract law, Illinois constitution, looking into a mirror and asking yourself, would you take a financial haircut due to somebody else’s malfeasence AND not be assured they’re gonna change there ways? Analyze this please.
- boat captain - Monday, Mar 18, 13 @ 2:49 pm:
@ unbiased observer-if the proposed pension reforms are enacted how much would that save? Would this eliminate the unfunded liability? If not where would the rest of it come from? Your the analyst-tell me.
- unbiased observer - Monday, Mar 18, 13 @ 2:57 pm:
ok great, lets cut out all posts on here about whose fault this. lets focus on solutions. also lets stop all suggestions regarding topics which wont make any significant differences in the fiscal situation, even though i think some of them are good ideas and go with the spirit of reform (refinancing debt, cutting money to illegals, eliminating govt waste).
then lets just say hypothetically that any sort of pension diminishment is unconstitutional. if that is the case, then the state of illinois really has no solutions to this problem that are politically possible.
only two things can make a SIGNIFICANT difference:
increased revenue and pension reform and it will take both.
just dont take solace in the fact that most of the posts on this website are against pension reform, because i can assure you they are not representative of the general populations thoughts on this matter. this will only get worse as the state starts to unravel over the next few years.
i think it is great to vote out all the politicians but it wont solve our problem, unless it takes new politicians in office to finally knuckle down and make tough choices, which is possible i suppose.
- CircularFiringSquad - Monday, Mar 18, 13 @ 3:03 pm:
It appears the Tribbies have turned state edits to some rube who has little or no finance background and no fell for the past
That was borne out by the recent edit reviewing the SEC report and what the Tribbies actually said inm 1994.
BTW the crosstabs on Simon Poll showed a majority of downstate, college educated,conservative, Repub, men,65+, white & rich favor upping the retirement age.
Messing with COLA only appealed to a majority of college educated, GOP, males with cash.
- RNUG - Monday, Mar 18, 13 @ 3:21 pm:
Cullerton’s “choice” is going to be really tough to defend in court for at least some of the pension funds …
When it comes to the AAI (COLA), members of 4 of the 5 systems actually have a portion of the employee pension contribution specifically deignated by name to pay for the AAI benefit. That means TRS, SURS (community college), GARS and JRS memebrs all pay something. TRS started paying in 1969 or sometime before. I couldn’t identify exactly when the other systems started paying; I think in the 1980’s but if any knows the specifc date, feel free to chime in.
The only system(s) where the members do not explicitly pay for the AAI is SERS and, possibly, the university portion of SURS (maybe a current SURS participant can confirm or deny, that whole university / community college split is a headache to follow through all the legalese).
Think about that for a minute; the employees have been pre-paying for years for their AAI in retirement.
For health insurance, all TRS and some SURS (community college) pay the full cost for their health insurance. Not only do they pay in retirement, they have a TRIP program that is pre-funded by a specificly designated portion of their employee retirement contribution. This started in 1995.
Think about that for a minute; the teachers have been pre-paying for years to subsidize their State group health insurance rates in retirement.
We can argue whether or not the percentages being pre-paid are actuarially sound, but the pre-payment is occurring. You can find the above in the various handbooks if you dig enough.
I think it’s going to be real tough to argue the retirees are not entitled to benefits they pre-paid for …
- RNUG - Monday, Mar 18, 13 @ 3:25 pm:
I don’t think I really need to comment much on the idiocy of further skipping pension fund payments; that’s exactly how we got in this mess in the first place.
- Anonymous - Monday, Mar 18, 13 @ 3:31 pm:
Rich, greatest line in your column was that Ty Fahner is a “self-styled pension expert.”
- Joe M - Monday, Mar 18, 13 @ 3:45 pm:
Re: SURS and AAI (COLA)
State University Employees pay one half of one percent for AAI (COLA)
Full time community college employees (except City Colleges of Chicago) pay an additional 0.5% of earnings to fund a health insurance plan devised for community college retirees.
- qaz - Monday, Mar 18, 13 @ 3:51 pm:
Others have said it as well but consideration under the law does not mean a “choice.” To have consideration, the members of the pension program need to be given something of value beyond what they already have and beyond what was promised in the past. http://law.yourdictionary.com/consideration
- RNUG - Monday, Mar 18, 13 @ 3:55 pm:
Joe M,
Thanks.
- PublicServant - Monday, Mar 18, 13 @ 3:59 pm:
The problem Qaz is that free premiums on state healthcare were promised in consideration of working 20 years for the state…
- Arthur Andersen - Monday, Mar 18, 13 @ 4:03 pm:
Unbiased observer, give us an example of your analytical skills by identifying one solid example of “waste” in the State budget and an estimate of the savings gained by stopping it. No “get rid of CMS” stuff. Real waste, real savings.
- unbiased observer - Monday, Mar 18, 13 @ 4:09 pm:
arthur anderson,
i dont know of any examples of “waste” that can have the sort of impact that either increased revenues or decreased pension benefits would have. that is why i dont think we should waste much time right now worrying about them. i only mention them because many people post about such ideas as ways to solve the financial crisis. but they will have little impact compared to the big 2 mentioned previously.
i have no problem with trimming the number of employees by not hiring to replace natural attrition in certain “nonessential areas” (whatever that means), or eliminating certain state programs which may be good but someone decides we dont have enough money to continue. maybe we shouldnt be funding any state money to illegals. but these items can only nibble around the edges of our problems.
it would be good to make govt more efficient but we shouldnt delude ourselves into thinking it will make a huge difference quickly.
- Arthur Andersen - Monday, Mar 18, 13 @ 4:26 pm:
unbiased, in plain talk, you don’t have squat.
You recycled a couple talking points, unquantified, with no specifics. And you call yourself an analyst? Not.
If you want to get on here, call names and throw out tripe, be prepared to back it up.
- Seriously - Monday, Mar 18, 13 @ 4:33 pm:
I would like to sign up for the Tribune for the five year subscription with the option of not paying if things get tough in the third year……you know, if my bird dies and I no longer need the cage liner.
- unbiased observer - Monday, Mar 18, 13 @ 4:50 pm:
arthur andersen,
im sorry you misunderstand/misread me. i dont think there are any examples of waste that can really make a difference in our state’s financial mess. only increased taxes and decreased pension obligations can do that.
is that clear enough for you?
for example, it is an admirable moral responsible thing to do, to make our govt more efficient, but i dont think that will make a significant difference right now. only increased revenue and decreased pension benefits can do that.
is that clear enough?
- qaz - Monday, Mar 18, 13 @ 4:54 pm:
“The problem Qaz is that free premiums on state healthcare were promised in consideration of working 20 years for the state… ” Yes, to change that deal, any new deal would have to contain a sweetener. For example, you could agree to pay more towards premiums in return for a substantial increase in wages. To be constitutional, there has to be a way you could benefit from a contract modification and not just a “choice” between different ways of losing. Changing a COLA from a fixed 3% to a variable one might work but only if it was possible that the variable could exceed 3%.
- Math Counts - Monday, Mar 18, 13 @ 4:59 pm:
@arthur anderson & unbiased observer:
There is of course, a third option: dramatically reducing the scope of government.
You can’t deliver the same services for alot cheaper, but you can deliver alot fewer services for alot cheaper.
- Harry Wasko - Monday, Mar 18, 13 @ 5:43 pm:
Unbiased Observer: Th admirable moral responsible thing to do is for the State to live up to its obligations. You remind me of the old man who always thought someones misfortune was his glory. How much of my $887.00 a month pension do I need to give back in your opinion? I think Rich explained it to you pretty good. Common sense.
- Meaningless - Monday, Mar 18, 13 @ 5:44 pm:
Even if there was somebody on the Tribune’s editorial board that really believed the “State needs flexibility to skip pension payments” I can’t believe they’d publish this in a lead story and throw any credibility they had left totally down the drain. The Chicago Tribune has become the laughing stock of the media world, which is too bad because they used to be a top-quality, respectful and dignified publication.
- Mama - Monday, Mar 18, 13 @ 6:54 pm:
Which services do you think the State of IL should cut? Education, State Police, State Colleges/ Universities, Hospitals, Mental Health, GA, State Road/Bridge Repairs… only to name a few. Stop paying Ilegals? - is the state actually giving money directly to the illegal people? I really don’t know. I do know there are adults who keep having kids in order to milk the state for more money. There should be a set amount that does not increase when one has another kid! The problem here is - - their kids still need to be housed, feed, provided with health care, educated, etc.. What is the answer?
- Wallendar - Monday, Mar 18, 13 @ 7:16 pm:
“Seriously” - yes, the Trib is very good for lining the bird cage but it has few peers in replacing “Pee Pee” pads for my Maltese.
Viva le Tribune!
- T.O. - Monday, Mar 18, 13 @ 7:27 pm:
I heard the state just hired two new budget experts. They are brothers from eastern Europe. A direct quote from their first job interview with PQ “I am Hans. And I am Frans. And we are here to flex you up!”
PQ “What exactly do you know about pensions?” Hans “Nothing. But we are experts at flexibility!”
Frans “Ja, Ja. Here’s some flexibility for you!”
PQ “I like these guys.”
- Mix_It_Up - Monday, Mar 18, 13 @ 8:16 pm:
I would like to know why the pension funds must be 100% funded by 2045? Is this some magic year? Why not 2055 or 2100? What difference does it make? You could lessen the severity of the pension payments significantly! and, as far as that goes, who knows what the future holds 30, 40 or 70 years down the road? If you do, let me know. I may have to make some adjustments in my deferred compensation allocations.
Also, do you honestly think that the legislators would let all that money sit there if the pensions even get to 80% funded on liability? No way! If times were good they would say that they could put the money to better use for the citizens of Illinois. All the stats are guessing games. Did the statisticians predict the last big recession? I wasn’t aware of it being predicted. Did anyone know about it before it happened? Smoke and Mirrors and our politicians are the best magicians that money can buy!
- RNUG - Monday, Mar 18, 13 @ 9:02 pm:
Mix_It_Up
I;m going to ignore the funding level question because there really is no good answer for that, just guidelines and opinions.
In terms of how long the payback period should be, it’s just like a mortgage or a car loan; you reach a point of diminishing returns with longer periods. Pop up a spreadsheet and use the financial functions to calculate the payments for $96B at varying percentages (say 3% to 6%) with periods ranging from 30 to 100 years. You will find that you will hit the point of diminishing returns in the 30 to 50 year range; beyond that point the payment reductions are almost non-existent for every 10 years longer.